Biden v. Nebraska and the Limits of a Secretary's Power to Cancel Debt

Here is a question for a civics quiz. Which branch of the federal government may decide to spend roughly four hundred billion dollars on a new program? If your answer is "Congress," you have read Article I. If your answer is "a cabinet secretary with a press conference and a website," you have been reading the Department of Education's 2022 announcement.

The Supreme Court settled the quiz on June 30, 2023, in Biden v. Nebraska, and it settled it the way the Founders would have. The Chief Justice opened his opinion with a sentence worth framing: "The question here is not whether something should be done; it is who has the authority to do it." That is the whole case. Not whether student debt is a problem, and not whether borrowers are sympathetic, but who in our system holds the power to decide.

The plan

On August 24, 2022, the Biden administration announced a program to cancel federal student loan debt. Borrowers with incomes below $125,000, or households below $250,000, would have up to $10,000 of federal student debt cancelled, and those who had received Pell Grants would have up to $20,000 cancelled. The administration said that some forty-three million borrowers would be eligible. The Congressional Budget Office estimated the cost at about four hundred billion dollars, on about $430 billion of debt erased, and other analysts put it higher.

Run the arithmetic on the two figures the government itself supplied. Four hundred billion dollars divided across forty-three million borrowers is about $9,300 per eligible borrower on average ($400,000,000,000 / 43,000,000 = $9,302). That is a statement about the average cost of the plan, not about what any one person received. But it shows the scale: a program averaging nearly ten thousand dollars per eligible borrower is not a rounding error in a student aid regulation. It is a spending program, and the Constitution has a place where spending programs are born.

The legal basis was not a new statute. Congress had not passed one. Instead the Secretary of Education relied on the Higher Education Relief Opportunities for Students Act of 2003, the HEROES Act. Congress passed it after the September 11 attacks to help service members and others affected by war and national emergencies. It gave the Secretary power to "waive or modify" provisions of the student aid laws so that affected borrowers would not end up worse off because of a national emergency. The Secretary pointed to the COVID-19 pandemic, which the President had declared a national emergency in March 2020, and said that the Act authorized the mass cancellation.

Six states led by Nebraska sued, and two borrowers sued separately in Texas. The lower courts blocked the plan, and the Supreme Court heard argument in February 2023.

Standing, and the Missouri question

Before it could reach the merits the Court had to decide whether anyone had standing to sue, meaning a concrete injury caused by the plan and fixable by a court. This was no technicality. A court that decides cases without a proper plaintiff has stepped outside Article III, which limits it to actual cases and controversies.

The Court found standing in Missouri. The state had created the Higher Education Loan Authority of the State of Missouri, known as MOHELA, a public corporation that serviced federal student loans and earned fees on them. The cancellation would have cut MOHELA's loan portfolio sharply and reduced its income by an estimated forty-four million dollars a year. Because MOHELA was a state instrumentality, the Court held that harm to it was harm to Missouri.

Justice Kagan, writing in dissent for three justices, disagreed. She argued that MOHELA was a separate legal entity with the power to sue in its own name, and that Missouri could not borrow its injury. It is a fair point and a close one, and the 6-3 split on the merits was matched by a 6-3 split here. I find the majority's reading, that an entity a state creates, funds and controls for public purposes is part of the state for standing purposes, to be reasonable. Reasonable people differ, and the dissent deserves to be read.

The holding

Chief Justice Roberts wrote the majority opinion, joined by Justices Thomas, Alito, Gorsuch, Kavanaugh and Barrett. The Court held that the HEROES Act did not authorize the Secretary's plan.

Three moves carry the reasoning.

One: the words. The statute lets the Secretary "waive or modify" legal provisions. Roberts took those two verbs seriously. To modify, he wrote, connotes moderate change. It is a limited power, to tweak and adjust. The plan did not tweak the loan statutes. It rewrote them, cancelling the debts that the statutes required borrowers to repay and creating, in effect, a new program of mass forgiveness. As for waive, the Secretary may waive a requirement, such as a deadline, but he may not use that power to erase a debt and write a new obligation in its place.

Two: the magnitude. The plan would reach tens of millions of borrowers and cost hundreds of billions. The Court observed that the Secretary had never before claimed power on that scale from the statute, and that a remedy of this size was a fundamental revision of the statute, not a modification of it. The Court said that Congress, when it wishes to give an executive official power of this size, must speak clearly.

Three: the background principle. The Court reasoned that this is the kind of major question that demands clear authorization from Congress. The doctrine, which I explain in The Major Questions Doctrine Explained, From Tobacco to the Power Plants, says that when an agency claims power of vast economic and political significance, the Court will not read an ambiguous statute to grant it. In 2022 the Court had applied the same logic in West Virginia v. EPA.

The concurrence: why Barrett's version matters

Justice Amy Coney Barrett wrote a separate concurrence, and it is the most important piece of the decision for anyone who worries that the major questions doctrine is a judge-made trick. Barrett argued that the doctrine is not a special rule that overrides the text. It is an ordinary tool of reading. A reasonable person, she wrote in substance, reading the words of a statute against the background of the setting, understands that a grant of power must be read in context. Context matters, and the context of a delegation from the legislature to an agency includes the principle that Congress does not hide elephants in mouseholes.

That is how a textualist defends the doctrine, and I find it persuasive. The doctrine does not add a requirement to the text. It reads the text as the people who passed it would have understood it.

The dissent

Justice Kagan wrote the principal dissent on the merits, joined by Justices Sotomayor and Jackson. Her argument was that the statute's words are broad. Congress said that the Secretary may "waive or modify any statutory or regulatory provision" in connection with a national emergency. That is a sweeping grant, she argued, and the Court was substituting its own sense of proportion for Congress's. She charged that the majority invoked the major questions doctrine as a license to override the plain language of a statute.

She had a point, and I will not say she did not. The statute does say "any." A better critic of the plan than the Court's majority might say that the problem was not the breadth of the word but the nature of the act. And that is exactly where the majority landed: the words allow modification, and mass cancellation is not modification.

Here is where I think the dissent errs. Her reading permits a statute passed in 2003 to support a program that Congress never discussed, never funded and never would have enacted. Consider what her position implies: that a cabinet officer may, on his own judgment, cancel a sum approaching half a trillion dollars so long as a declared emergency provides the occasion. Follow that logic. A President who declares an emergency, and an agency head who points to an old law, could discharge debts, suspend payments or redirect funds in any amount. That is not a reading of a statute. It is the creation of a power the Constitution gave to the legislature.

The principle underneath: the power of the purse

Now to the part the Founders cared about most.

The Constitution places the power to raise and spend money in Congress. Article I, Section 8 gives Congress the power to lay and collect taxes and to pay the debts of the United States. Article I, Section 9 says that no money shall be drawn from the Treasury but in consequence of appropriations made by law. James Madison called the power of the purse in the House of Representatives the "most compleat and effectual weapon" the Constitution gives the people's representatives for the redress of every grievance, in Federalist 58. I cover the clause in more detail in No Money Shall Be Drawn but by Appropriation, Congress's Power of the Purse.

A cancellation of loans is not an appropriation in the usual sense, since no check is cut. But economically it is the same. When the government forgives a debt it is owed, it gives up an asset, and the burden falls on the taxpayer who funds the Treasury. A forgiven loan is a transfer. That is the substance of the matter, and a Constitution that gives the purse to Congress does not permit a Secretary to move a sum of that size with a stroke of a pen.

One more thing about the principle: it does not depend on politics. If a conservative Secretary decided that a statute from decades ago authorized a program of large tax rebates or farm subsidies without a vote, I would make the same argument against him. The rule is the rule. Congress holds the purse, and the people hold Congress accountable through elections. When an executive takes the purse in his own hands, the voter has no one to fire.

The strongest objection and the answer

A fair critic would say: borrowers are real people, many of them are in distress, and a President who sees a problem should be allowed to act when Congress will not. Why should the Court stand in the way of relief?

I have three answers.

First, the sympathy is not the question. The Chief Justice said so, and he was right. Whether the policy is good is for the voters and their representatives, and an unauthorized policy does not become authorized because it is kind.

Second, the plan was not a neutral act of mercy. It transferred hundreds of billions of dollars, in part from taxpayers who never went to college or who paid their loans. A plumber who skipped college, or a family that scrimped to repay, was asked to cover the debts of others. A fair policy debate would weigh that. I look at the economics of the college price spiral in Where Tuition Dollars Go, From Administrators to the Lazy River, and at the way federal loans fed it in Grad PLUS Was a Blank Check for Graduate School, and Here Is the Proof.

Third, forgiveness without reform treats the symptom and feeds the disease. If the federal government will pay off debts that colleges helped create by raising prices, the incentive to raise prices does not go away. Debt relief that does nothing about tuition invites the same debt again. The alternatives, such as Four Years of Wages Versus Four Years of Debt, the Apprenticeship Math, make the trade-offs visible.

After the decision

The ruling did not end the argument about student debt, and I will be careful here, since subsequent events fall outside what I can state with certainty. What the decision did settle is the narrow point: the HEROES Act did not authorize this plan. The question of what, if anything, Congress should do about student loans remains where it always was, with Congress. That is where it belongs.

You can follow the debt's size and growth on the national debt clock, and read how courts have treated questions of agency power at the courts page.

The case in brief

1. In 2022 the Education Secretary announced cancellation of up to $10,000 per borrower, $20,000 for Pell recipients, estimated at roughly $400 billion, citing the HEROES Act of 2003.
2. In Biden v. Nebraska (2023) the Court held that Missouri had standing through MOHELA and that the Act's power to "waive or modify" provisions does not allow rewriting the loan statutes.
3. Justice Barrett's concurrence grounds the major questions doctrine in ordinary reading of text in context, and Justice Kagan's dissent argued the statute's words were broad.
4. The deepest principle is Article I: the power to spend and appropriate belongs to Congress, and no secretary may take it.
5. Whether student debt should be cancelled is a question for Congress and the voters, not for an agency.

What you can do: find out how your own representative voted on any student loan legislation by checking your representatives, and write one letter asking where they stand.